Risk Tolerance in Investment

A stock with a beta coefficient of -0.5 is less risky than the market as a whole.

A portfolio consisting of stocks with high beta coefficients will always have a higher expected return than a portfolio consisting of stocks with low beta coefficients.

The CAPM assumes that investors can lend and borrow at the risk-free rate.

A stock with a beta coefficient of 1 is less risky than the market as a whole.

Hedging strategies can eliminate all risks associated with an investment.

Inflation risk can be completely diversified away in a portfolio.

A beta coefficient of 1.2 indicates that the security is less volatile than the overall market.

Diversification can eliminate systematic risk, but not unsystematic risk.

In a portfolio, correlation coefficients range from -1 to +2.

The capital asset pricing model (CAPM) assumes that investors can lend and borrow at the risk-free rate, but not at the expected market return.

Hedging strategies can entirely eliminate inflation risk.

Risk-neutral investors prioritize the safety of principal over the possibility of a higher return on their money.

Risk assessment is only used to determine the likelihood of loss on an asset, loan, or investment.

Risk-averse investors are more interested in capital gains from speculative assets than capital preservation from lower risk assets.

Scenario analysis is used to obtain a sense of the certainty among returns.

Risk-seeking investors choose the investment with the lower return regardless of its risk.

Assessing risk is only essential for determining how worthwhile a specific investment is.